The following is a preview of proposals on political contributions, health care, product safety, and other social issues filed by shareholders at U.S. companies this year.
For the 2008 proxy season, the second-leading category of social issues proposals--after those concerning climate change--asks companies to disclose and better monitor their political contributions, including, in many cases, their political activities through trade associations. So far, proponents have filed more than 50 such resolutions.
This season also features an expanded campaign on health care issues and new proposals that target product safety. Proposals also abound on long-standing concerns for socially focused investors, including those seeking to expand equal employment protections to employees regardless of sexual orientation.
The shareholder effort to obtain more information on corporate political contributions is now in its fifth year. The proposals ask companies to issue semi-annual reports on all political contributions, as well as providing the guidelines for those contributions and identifying the persons involved in making contribution decisions. The resolutions include a request for information on contributions to so-called "527 committees"--groups formed for the purpose of influencing elections, but not overtly supporting or opposing specific candidates. In 2007, the average support for these proposals climbed to 25 percent. Moreover, proponents achieved 22 withdrawal agreements; they had worked out only nine in the first three years of the campaign.
The 2008 resolutions contain a clause asking for a reporting of dues paid to trade associations, defined in the proposal as "payments made to any tax exempt organization that is used for an expenditure or contribution if made directly by the corporation would not be deductible under Section 162 (e)(1)(B) of the Internal Revenue Code." The resolutions follow a template developed by the Center for Political Accountability, a research group in Washington that focuses on corporate political spending. The shareholder campaign was initially spearheaded by labor unions, but social investment funds, church groups, and New York City's funds are now filing extensively.
At this point the number of withdrawals of political contribution proposals is not reaching the heights of 2007 but is still substantial. Calvert Asset Management has reached a withdrawal agreement with Xerox, and Domini Social Investments withdrew a similar proposal at American Express. In addition, Walden Asset Management has reached agreements with Adobe Systems, Praxair and United Parcel Service. Other withdrawals on this topic include AFL-CIO resolutions at Johnson & Johnson and Bristol-Myers Squibb, a New York City funds resolution at United Technologies, an International Brotherhood of Teamsters proposal at Capital One, and a Sheet Metal Workers' International Association resolution at Prudential Financial.
Health Care Principles
This is the second year that activist shareholders have waged a campaign for universal health care. In 2007, a coalition of church groups and the Nathan Cummings Foundation, with advice from the AFL-CIO, proposed a resolution asking seven companies to report on "the implications of rising health care expenses and how it is positioning itself to address this public policy issue without compromising the health and productivity of its work force." Only two of those resolutions went to a vote.
The 2008 campaign, which includes 28 resolutions from the AFL-CIO and church groups, is considerably larger. The proposals' resolved clauses list five Institute of Medicine principles, which state that health care coverage should be universal, continuous, and affordable. Church groups submitted proposals at CVS Caremark and other health care firms that focus on corporate lobbying efforts to maintain the status quo. The AFL-CIO and church groups also filed proposals that stress the impact of health care costs on the U.S. economy at Wendy's International and other corporations outside the health care industry.
Proponents have withdrawn resolutions at Abbott Laboratories, Aetna, Bristol-Myers Squibb, Eli Lilly, General Electric, IBM, Johnson & Johnson, McDonald's, Medco, WellPoint, ExxonMobil, Merck, Target, and Waste Management after many of the companies agreed to post statements on health care reform on their Web sites. The AFL-CIO withdrew the resolution at IBM after the company issued a two-page letter on its health care position, supporting universal coverage. At this point, it appears that 12 resolutions on the health care principles will come to a vote.
For the second year in a row, the SEC staff has issued confusing "no action" letters on health care resolutions. The staff of the agency's Division of Corporation Finance has traditionally allowed companies to exclude health care proposals on "ordinary business" grounds, based on the reasoning that they relate to employee benefits. This year, a number of companies argued that they should be able to omit resolutions on these grounds. Among them, United Technologies characterized the proposal as "seeking modifications to the company's employee benefit programs," while Boeing argued that "the proposal, concerning health care costs, should be treated as relating to the company's ordinary business of providing employee benefits," and CVS Caremark argued that it would "impact how the company determines employee health care benefits issues."
While the SEC staff rejected the omission requests from United Technologies, Wendy's, and Boeing, the agency allowed CVS Caremark and Wyeth to exclude the church groups' resolution that mentioned lobbying on ordinary business grounds. The SEC staff letter defined ordinary business in this case as "employee benefits." Why the SEC staff allowed the omission of the proposals that mentioned lobbying, but not the other health care proposals, is unclear.